What's going on everyone? The interview you're about to listen to is with Life Abraham Who happens to be the co-ceo and co-founder of the Trading Brokerage Public but I would argue it's much more of a social media Network Public The company came to the attention of many people in early 2021 with the rise of the retail trading movement when they made the business decision to no longer participate in Peef Off also known as payment for orderflow because they view the practice to be loaded with conflicts of interest. Throughout the interview, Life shares what it was like to be running a retail Centric Brokerage during one of the craziest Market events of all time, he talks about the dumb Money movement and the new movie and he also talks about the newest themes that he's seeing in the world of trading specifically through the retail lens. I Really think you're going to enjoy it? So obviously many people who know about public who use public it kind of came from the retail Revolution Circuit 2021 and that really all got going with Keith Gil Roren Kitty Various names, but obviously GameStop Gme so I was reading a recent Twitter thread from you and folks if you want to read it I Highly suggest you do. I'll make sure it's in the description of the video.

Could you take us through what it was like running a brokerage that served retail? Traders During one of arguably the craziest retail trading phenomena that the Market's ever seen, the title was obviously nuts. Um, where Were You by the time do like do you remember January 278 I remember exactly? Uh so on Wednesday the 26th uh I had started making content I wanted to talk about Finance for the year before and the tldr of it I was really bad. My friends bullied me into streaming so I started streaming December 31st of 2020 and I was doing it every single weekend just to cover I was a big big reader of Wall Street bet subreddit and it went down and I was too excited cuz I was in GameStop myself so I there I was Wednesday I'm like what piece of content do I possibly make today and I was talking to my girlfriend now fiance and she's like why don't you just stream you've been working on that anyway it was Wednesday but I was only doing it on the weekend and I remember apple and Tesla were both reporting that night in between the reports that's when the Wall Street um the subreddit went down so I changed my title and I went from like 50 viewers to like a thousand I was like this is it I am content I've cracked media the next day I stream him from a th000 to 5 and then on Friday got bigger I was I called my boss that week and I was like oh I'm going to be sick I streamed all week cuz I was in Gme I was excited and then by the next weekend I had quit and I they were like watching you online at the same time and were like you don't you don't you don't look that sick yeah no they thought I was going to like a competitor or something I'm like trust me I am not with a competitor right now so for me it was crazy cuz like since College I was reading the subredit I was in Gme I was following the story and then what people were so excited about happening it seemed like it was happening and every was like oh like what this is so ridiculous and then you see people like obviously they were what we would refer to now is like degenerate options but they were rolling hundreds of thousands if not millions of dollars into even more degenerate options and then the fact that it started working like it was almost the energy of like a a sports match where like like the underdog was winning. There was a certain energy in the air and that's what I found so fascinating of public is your focus on cultivating that Community sense and that's what it was it was.

It was a community of dumb money people who were making call outs and then all of a sudden like these Wall Street insiders started to lose so I remember it clearly I mean it like truly it was a life-changing event for me because I went from being a coder in Corporate America to now I get to have offer awesome conversations such as this. so I remember it distinctly Wednesday Thursday Friday and then from there obviously even more Insanity ensued but on on my side of it, there's a lot of retail people who by Thursday when from as happy as could possibly be to as angry and irate as they've ever been in their life. so just give us some insights of just like the numbers I read something about I believe your engineers had a 247 Zoom call like literally they were just as up as much as they could be with what Red Bull and coffee going through their system and and and for us it was like you know uh we were less than 18 months at Market at the time so like we were a super young company I think we were 40 something people at the time okay um and so on and uh uh and I think what was interesting was uh what you saw happening on like Tuesday Wednesday I think were like the first days where where the stock where like really went up. we did not really see influx until Thursday and so Wednesday was still like Wednesday the 27th I think it was um was that was like our best day ever by 2x which was great obviously um but we hadn't really truly recognized yet like you know what was happening to us to say and then uh, the morning of Thursday the 28th is basically like was like 6 AM our CTO who's based in Copenhagen like called us up and was basically like yo guys uh what's going on um so yesterday was our best day ever by 2X and we already had more signups than that and at 6:00 am in the morning you know New York time.

um and we were like uh okay then uh by 8:30 it was clear uh or like we heard or maybe it was announced or so that you know our competitor on the west coast uh um you know who you know would uh would restrict the buying of a certain amount of stocks. um and that's what we knew. obviously like for us it was like okay, we're going to be the alternative now um so we got to obviously seize the moment also for us in terms of F acquisition in terms of you know, making sure that people can trade, etc etc. um and at that moment in time really it's when we saw obviously you know traffic start like like starting to rip and that's why we also started to make moves like hey you know can we get Twitter ads live that can you know basically tell you of like how to easily switch to public you know things like that um uh that we that we then put out but we had this moment where um one of our Engineers um like a few weeks before that he gave us this call and like we were just like planning the next year or something like that.

you know and it was a thing of like yeah. so if we actually double the user base um we will have to refactor the entire code because lagy the system would crash like fine we time we'll put it into the road map for the next year. um we were I think on track to double the user base within 48 hours at that time. um and that's when basically to your point, you know where you reference that from that tweet storm there.

um when when the engineers just went on a zoom call? basically that was just on the entire time and people were just like going on and doing code reviews and real time on the zoom call and so on. you know and then end? They kept it up, they kept the systems up which is still phenomenal like mindboggling that this all worked out and um and yeah, so you were at the point where obviously you had a lot of technical hurdles to get over obviously cuz like you're just growing rapidly, there's this social craziness going on and you're at the point where your competitors obviously the infamous taking away the buy button and from there people that was the first I remember that of everyone's like oh the buy button and then from there people for probably the first time ever retail Traders started to look into what is now called Market structure and they start to learn about what you were referring to of payment for order flow Peef off Which for those of you who don't know, it's generically the concept of brokerages selling their customers trades. so what's referred to as market makers feel free to look it up. But anyway, they make a lot of money and then this has brought up fair discussions of is there a conflict of interest Now obviously certain companies, certain brokerages have decided Well we like that as a revenue source and they might not see it as a conflict of interest I don't know I haven't talked with them but you guys took a different route and it seems like you focus a lot more on we have this community.

we have a very growing Community We want to keep them happy so obviously it was a business decision. maybe a moral decision for you guys to say we don't want to engage in payment for order flow so could you talk us about what happened when you saw this craziness and you're like oh okay, we get what's going on and we're not going to engage in this practice anymore. We had talked about going off P off a bunch. um before that um but we never pulled the trigger until then because we always had this thing of like who would really care You know like you will find some crazy you know Market structure nerds that will applaud you.

but other than that like you know, do people really care, etc etc. And to your point in that moment it was this Mass education event where suddenly people educate themselves around it and you know uh uh and so on. And there was really the moment where suddenly Everyone Cared you know and went from like who would care about to like well maybe everyone does and um and that really accelerated in the decision to to to uh to go off P4 it took us about a week to like. really kind of like it's not like shutting it off, it's basically like you you us just routing your orders differently.

You have to kind of like use different pipes for like better wording. um but it took us about a week to then from announcement to actually go off it and so on. The PE was also interesting thing because they have these two sides to it right? The one side is the the incentives you have as a brokerage which is I what? I talked about earlier right of like how do you design your product, um, what products you offer to whom you know, um, and so on and like what your incentives are in that regard, right? And are you incentivized to give someone who's super new to the market you know access to the most riskiest options trades and you want to do that as quickly as possible? Or you want people to stick with you for the next two decades and build their portfolios over time right? And that's a little bit the the the you know kind of like mindset difference there. So to say one is like take as money like take as much money as possible as quickly as possible and the other one is like let's grow with the person over time and um for the other hand you have also just this aspect on P which is Market structures and that's the one that's like harder to understand and also just you know not as clear right And that's a little bit where like you know Ginla has been trying to the chair has been trying to kind of poke into and so on because what you have there is that um the this this this concept that is the Nbbo is the price you see of a stock when you look at whatever app you're using.

is that price correct and um the Nbbo like that price that you're seeing like you know the national best bid and offer is uh uh is informed by trades that are executed on exchanges but is not informed by trades that are executing off exchanges like market makers dark pools Etc And because they don't have these reporting requirements and in a world where 40 plus% of you know trades and in the retail world even more than that are being executed not on exchanges, but on these market makers and so on. you know, um, especially for stocks that are very retail heavy If that like the the the chance that this price is correct is just you know, likely not as high, right? uh and so on. And that's really what the market structure kind of kind of piece comes into. If, like you know if if the price is generated by just subset of data in the markets and not the entire you know data that is actually there and happening of flow.

um you know the the Nbbo itself, the price itself that you're seeing of a stock in the market, Any given point in time might be flawed. Yeah. I Like that's that's the bigger, that's the bigger one, that's just very hard to grasp. You can have millions discussions about it with anyone, right? and and so on.

I Believe the SEC Chairman Gendler, like the term he likes to use, is it. with so much trading happening either at market Makers or dark pools, price discoverability could obviously be hit just because it is such a large percentage. Now this is going to get kind of nerdy here, but I do think it's important. So I've read some posts uh, from public and one interesting argument from market makers is that they're actually improving the Mbbo the national best bid in offer and they're saying if you don't do it this way, you're probably going to get a lot worse fills.

But I've actually read articles from your company that you've been doing all this trading on L Exchange and you're actually starting to develop a sizable data set that suggests that's not the truth. You're trading on L exchanges and it doesn't seem to be like horrific in any nature of the word to the Mbbo. So I I Know this is a little bit more of the nerdy part, but just to explain to the people who maybe really care about the market structure, public trades on LD exchanges are your customers in any way being hurt. So the way you can think about P really it's a game of Arbitrage right? And so it's really just you have a bit and you have an ask and the spread in between is what is being taken.

Now the concept of price Improvement is really just the concept of as a broker you have to execute trades either at or below the Nbbo right? and so the second you execute a little bit below the Nbbo that is considered price Improvement And so as a market maker you can go out and be like hey, you know let's say the stock is 100 bucks. You know you've executed at 99.98 You know you can be like I deler price Improvement and now that can, you can add that to your stats and you can put a press release out one day that says look we're having You know 98% of the trades that we execute have price Improvement and it sounds really great You know? But um as I think Dave La always says that who's like Liber an advocate for for or like against P5 I guess you know? Um he has a little saying where he says basic basically you know, um a slightly better price does not equal the best price and um where what we do is we go out and we have basically Auto routing where we look at the different exchanges and we're looking at like where are we getting the best price and then we execute there and that's how the system works. basically right and um um and so it's a like it's a different way to kind of. you know, like uh uh look at the execution, it's a little bit.

Also what? like what like Gena is kind of poking at in terms of having some sort of system where people where market makers also would have to compete for the for the execution right? What happens often with market makers is that you have direct agreements with the market maker. so you're executing with C virtal directly and you will send all your trades there and they will do that. but you will not scour the market for where you find the best price in that moment and that's kind of like the main difference I find it to be actually pretty crazy that the only reason we're talking about this and it really is a nerdy finan cial thing that probably before 2021 I bet less than a thousand people in the world knew about it, cared about it and now it really is on the Forefront of the retail Traders mind especially if they went through the whole Gme Saga that obviously led to a lot more craziness and I I want to get specifically into the concept of dumb money as the movement also the book and the movie and all that good stuff. But before we do it obviously with P POF we know that a lot of brokerages are getting money that way.

that's how they keep the lights on I Think it's fair for someone watching this if there saying okay public doesn't make money from Paa. So how do you guys pay your bills Like what is your profit generating mechanism you can really think about in like three ways. Number one, we do have commissions on certain trades crypto Alternatives You know we have a fee on after hours trading. For example, things like that we have a subscription product called premium.

Then we also make things like interest on cash. We do. we do do Securities lending um and then we have things like management fees. So for example, if you do use the treasury account which is investing into you know us builds there's actually um also like a management View and things like that.

So there's a wide marray of things you know depending on which products you use um that we just directly charge for right? And the way we also think about is, you know Um is is is the sense of that. We rather build a model where it's transparent on what do we charge for and what do you pay for um and have that alignment where it's always very clear of how we make money versus you know the things where it's just very intransparent. It's interesting some your competitors they brought people in, they're like hey, commission free and it was great and now people are starting to understand like how is paid off and like it. It's just an interesting question that I think good to get out of the way now arguably to like.

The exciting thing of that really got like hey, change my life, arguably change your life Chang a lot of people's lives, the Gme GameStop dumb money craziness and really even that. like thinking back on it. Now some of the insane things that came out of it I mean we had government hearings you had Ken Griffin up there so he's talking about payment for like it really is like it's not just a Black Swan event like whatever the term would be for something statistically even crazier than that, That's what happened. It's to the point that there's been many documentaries, we've had books, and now we have a movie.

So I guess first of all, before we get into like all the books and the movies and that what was it like for you personally when you were sitting there that week of late January 2021 of just seeing GameStop go up I guess I don't know if you were involved in did you own Gme and even if you didn't like what was it like when you were just saying like oh wow like these retail Traders might be right on something here they might actually be screwing over Wall Street I found it obviously incredibly fascinating and I think the thing that a little bit also like the knot of that they called the the movie Dumb money you know and the sense of that you know the the, the like, the like, the like irony in that term on the back of events like that you know uh uh I think it's quite awesome and when you were talking about even just you know communities like W Street BS of like yes there is this like you know, oh my degenerates, you know, type of you know, like speculative you know, more like fun you know, based trading going on for sure. but there's also some really sophisticated stuff you know. and I think generally speaking, what you know always gets kind of like discounted is just like this smarts of retail investing and how smart people actually are and uh uh uh and how much sophistication actually exists you know, within the communities within the retail investor community in general and so on. Um, and I think that's obviously what just came out there right? like that? Uh, also just the ability that someone who is more sophisticated was able to communicate and like explain something like a short squeeze to millions of others of people.

Basically, you know, and basically they just like simplifying the concept of it and simplifying certain you know terms it and like inventing your own around them and so on to like create this. Mass event is quite like fascinating and phenomenal right? That that was possible, you know. and so so I Think that's what's what's so insane about this whole thing that you know that that also just like the way just like language was used and like the communication between people and you know, uh and that kind of like Mass organization. you know that that that happened there, uh that that made that possible I think it's is is it's crazy, a truly viral moment and the thing that I always found interesting about it and you were hinting towards it is it was people who were arguably very sophisticated and they could explain so many aspects of Market structure.

I Think a lot of people on the subreddit knew about payment. Forward flow knew about this and that and it was the ultimate troll in the sense that they would use their high amount of knowledge in just a degenerate way like so they would explain something perfectly and they're like and I have a 1% chance of this working and then they would go throw money behind it and then everyone else would just laugh and like applaud the craziness or like in any way if it went their favor. If it didn't the fact that they knew exactly what they were doing in the math around it and then chose to do a super high-risk hward. it's the same thing as going up to a roulette wheel putting a stack of money on green and then they roll it and everyone was walking around like well.

I'm going to see how this one plays out like cuz why would you not it It's such a it's such a human thing and really I think that's what you're plugging into with your brokerage. Anyways, public of how do we get the communities there? How do we make the communities happy and then thus they would naturally grow after a point of I I Suppose critical Mass I Don't want to pressure you into being a movie critic or anything like that, but if you've seen the movie now that just came out dumb money, what are your thoughts on it? Well, is it well acted, well written? I haven't seen it yet I'm very, very excited, but just in case you are aspiring to be a movie critic, what would be your breakdown of the movie Dumb Money I think it was really fun to be honest. um so yes I watched it already okay um um um I watch it already I think it was really fun. um you know obviously hard for them to like go into all these details like we just talked about the details of POF and the details of Market structures and you know all this stuff you know.

Also, just like the whole thing of you know why you know our competitor on the west coast had to had to hold the stocks and so on right? and like the whole concept with like the VAR and the capital requirements and that that the clearing firm has and like all these technicalities you know obviously things that did not necessarily come across in the movie right it's still a mainstream movie and I think P has mentioned maybe two three times but also not necessarily explained you know and stuff and so um um and so you know I think it's great entertainment I would not view it as a documentary necessarily. in terms of that it explains you know perfectly of like what all the details and interraci were that happened throughout those weeks. man well I'm excited to see it myself and uh hey it's definitely it's seemingly making some ripples in the world of just media and trending and people talking about it. So hey I I'm excited to see how popular it truly gets.

So uh, I Have personally seen the recent theme of AI I everywhere I go AI it It sounds like on your earnings calls anyone's earnings calls like if you say AI like your stock just took off. That was apparently the winning trade of like 2022 to 2023. So um I I'm noticing on your website you have a product referred to as Alpha and it sounds like you're somehow using AI to I assume improve trading and investing. Could you tell us what Alpha is and also your thoughts on the I Guess Ai and it's placing the future of trading investing? Um, yeah.

So First Alpha is basically like a a research assistant right? so on any stock. If you open the app on any stock and swipe down, Alpha pops up and you can ask any question about the stock. And so we've basically fed a Gp4 engine with you know, um, fundamental data around the companies, all the financials, earnings call transcripts, analyst reports you know, ratings on the stocks, etc. etc.

etc. the news events you know, and so on. and basically just made it incredibly easy to be accessible through this kind of like chatbot style way. you know that specifically.

Also, GPT is just incredibly good at right? and so I can just like swap down any stock and ask any question. Um, and that's really just for us. The way we think about it is like, you know, how can we just add like make research as easy and accessible as possible because generally speaking, you know, obviously we want people to build portfolios over the long term. You know it's fun to speculate here or there.

totally get it. But also, you actually want to build a little bit your future and actually build your portfolio over the long term and kind of grow your money. and uh, as part of that, truly understanding what you invest in is obviously key, right? and so making that just like very fast and accessible and easy I think is super important. Especially things like a bunch of like, you know, you know, company fundamentals and stuff like that.

Sometimes they only live in some sort of like, you know, uh, company filing, you know, after some earnings report and so on. and so they're potentially harder to find because they not to see structure data on shart somewhere and so on. and so and that's Bas what we created right to to make all that really easily accessible, have beautiful charts around it. all that kind of stuff.

um on. AI In general like I'm quite excited about it. like think it's gonna I think it's going to have a massive impact on generally I think all Industries but also in investing Um, obviously the very first thing that always that everyone will always think about is like cool can AI you know predict which stock will you know go up and down and whatnot and I would my my My current answer would be like likely not um and you know if you find out otherwise then let's start a Hch fund together tomorrow. But but uh um um and so and so so the way we really think about more of like okay, can you use the technology to just like enable research and stuff because it's just really good at consuming data and spitting data back out in different types of formats, comparing it and so on.

You know, um and also like you know, language models have not shown themselves to be really good with math yet. Um, from what we've seen. Um, you know there's other things that can do math better and you can kind of combine the different systems and stuff like that. But um, but generally speaking I think uh, you know right now it lenss itself best for you know, easy access to information more than have ai truly make decisions for me.

um I think we're far away from that when it comes to investing so it does sound like you're more of the mindset and in the camp of like AI is here to say like maybe not a bubble in terms of the financial like investment standpoint, but in terms of Technology culture like just really us as a human race it sounds like you agree that AI here today are there other themes you're seeing right now or maybe other communities in the world of retail trading that you're like particularly noticing the growth of or excited about yourself I mean generally speaking, we are obviously like with yield Back right and so with the FED rates where they are and yield being back right, everyone sees their High savings account all the treasury account on public 5.5% FYI Um, it's like uh it I think it's it has and will even more kind of resurrect a bunch of other asset classes I Think throughout the last decade and everyone who like joined the markets throughout that times like stocks are King right? and that has been like the one asset class that everyone has been in. you know, if through directly owning stocks or through options trades. but like you know, equities was it and I think now. um you're seeing how how a lot of other asset class become.

You know, kind of interesting again, right? So look at, you know, obviously T builds right. look at other fonts, uh uh uh, like like like other other sorts of bonds, you know and so on. You know we find things like you know, things like corporate bonds super interesting or you know, munis, etc etc. and so we think there's lot that's going to happen there and um, and then with that.

also like what are other types of you know, esset classes like that around it right? and so um, you know we are. You know, soon going to go out with for example, investing into royalties you know? which is also a little bit like getting some yield out of it. you know, like actually owning a part of you know, basically IP that generates royalties as cash flow you know, and having that being and stuff like that and so you know. especially like as yield is back and so on.

Um I think it will inspire a lot of people to kind of look for returns, not just within stocks, but in many other things as well and how that impacts investing strategies. their portfol at large and so on. I think there's a lot that's going to happen that uh, I'm excited to see it play out, but I think you bring up some pretty valid points. But overall, I appreciate your time.

I'm sure all the viewers do too. Uh, quick question. So if people want to keep up to date with your thoughts and your opinions and your statements, or even what's going on with public new announcements, all that, where's the best place to connect with you and the company? Yeah, public, just go to UIC on Twitter That's always the best. Me personally, it's live.

Thunder L If and then Thunder there's a whole story to the Thunder for a different podcast that's my own handle. Um, that's always the best. Twitter is the best. um or X now I'm sorry X and uh uh yeah, that's the best.

All right. Well folks, if you're listening, I'll make sure that's in the description below so it's just one click away. But once again, we appreciate your time today life and hopefully we could talk in the future with your news announcements and all that. So thank you very much and we'll talk later.

Awesome! Thanks.